86R7939 LED-D
By: Walle H.B. No. 4037
A BILL TO BE ENTITLED
AN ACT
relating to the creation of a state-administered retirement plan;
authorizing administrative penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subtitle D, Title 2, Labor Code, is amended by
adding Chapter 83 to read as follows:
CHAPTER 83. SECURE RETIREMENT SAVINGS PROGRAM OF TEXAS
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 83.001. DEFINITIONS. In this chapter:
(1) "Annuity" means a fixed sum of money paid on a
monthly basis to a participant on retirement.
(2) "Board" means the board of trustees established
under Section 83.002.
(3) "Compensation," unless the context otherwise
requires, means compensation within the meaning of Section
219(f)(1), Internal Revenue Code, that is received by an eligible
employee from an eligible employer.
(4) "Contribution rate" means the percentage of an
eligible employee's compensation that is withheld from their
compensation and paid to the employee's individual retirement
account under the program.
(5) "Eligible employee" means any individual who is 18
years of age or older, who is employed by an eligible employer, and
whose compensation is subject to federal income taxes.
(6) "Eligible employer" means an employer that:
(A) has not been a participating or contributing
employer in a retirement plan under Sections 401(a), 401(k),
403(a), 403(b), 408(k), or 408(p), Internal Revenue Code, at any
time during the preceding two calendar years; and
(B) elects to be a participating employer as
permitted in accordance with rules and procedures established by
the board.
(7) "Employer":
(A) means a person that:
(i) is engaged in a business, profession,
trade, or other enterprise in this state, whether for profit or not
for profit, that employs two or more individuals living in this
state; or
(ii) for the purpose of this chapter only,
issues an Internal Revenue Service Form 1099-Miscellaneous Income
to five or more individuals living in this state; and
(B) does not include a federal or state entity,
agency, instrumentality, or political subdivision.
(8) "Individual retirement account" means an
individual retirement account or individual retirement annuity as
defined by Section 408, Internal Revenue Code, or a Roth IRA as
defined by Section 408A, Internal Revenue Code.
(9) "Internal Revenue Code" means the Internal Revenue
Code of 1986.
(10) "IRA plan" means a plan described by Section
83.059(b)(1).
(11) "IRA trust account" means the IRA plan's account
within the trust fund established under Section 83.059.
(12) "Multiple-employer plan" means a plan described
by Section 83.059(b)(2).
(13) "Multiple-employer plan account" means a
participant's account that accepts contributions from the
participant, the participant's employer, or both, and that is
established under Sections 401(a) and 414(i), Internal Revenue
Code.
(14) "Multiple-employer trust account" means the
multiple-employer plan's account within the trust fund established
under Section 83.059.
(15) "Participant" means an individual who
contributes or has contributed through payroll deductions or
through voluntary contributions to the program and includes:
(A) an individual who moves out of state and
elects to continue participating in the program by making direct
contributions; and
(B) the beneficiary of a deceased individual who
contributed to the program and an alternate payee under state law
for purposes of the withdrawal, transfer, rollover, or other
distribution of savings.
(16) "Participating employer" means an eligible
employer that provides a payroll deposit retirement savings
arrangement under this chapter for an eligible employee.
(17) "Payroll" means any method of transferring
compensation to an employee of an employer.
(18) "Program" means the secure retirement savings
program established by this chapter.
Sec. 83.002. BOARD OF TRUSTEES. (a) The board of trustees
is composed of five trustees as follows:
(1) the comptroller, or a designee, who serves as
chair;
(2) a participating employer, appointed by the
governor;
(3) a participant, appointed by the speaker of the
house of representatives;
(4) a resident of this state with expertise in
regulatory matters relating to retirement savings, appointed by the
chief justice of the supreme court; and
(5) a resident of this state with expertise in
investment matters relating to retirement savings, appointed by the
attorney general.
(b) Appointments to the board are subject to the advice and
consent of the senate.
(c) The term of office for each trustee is two years.
(d) In the event of a trustee vacancy, the appointing
official shall appoint a replacement to serve for the trustee's
unexpired term.
(e) A majority of the board constitutes a quorum for the
transaction of business.
(f) A trustee serves without compensation but is entitled to
receive reimbursement of travel expenses incurred by the trustee
while conducting the business of the board as provided in the
General Appropriations Act.
Sec. 83.003. BOARD POWERS AND DUTIES; ANNUAL FINANCIAL
REPORT REQUIRED. (a) The board shall:
(1) design, establish, administer, and enforce the
program in accordance with Subchapter B;
(2) employ a program director and other individuals as
the board considers necessary to administer the program and the
administrative fund;
(3) adopt administrative rules and procedures,
including contested case and enforcement provisions, to carry out
the purposes of this chapter;
(4) enter into contracts necessary or recommended to
administer the program;
(5) request and receive information from any state
agency or entity as needed to administer the program;
(6) request and receive information from employers of
eligible employees residing in this state as needed to administer
the program;
(7) annually publish an audited financial report on
the operations of the program in accordance with Subsection (b);
and
(8) annually prepare and adopt a written statement of
investment policy that includes a risk management and oversight
program.
(b) The audited financial report required by Subsection
(a)(7) must be prepared in accordance with generally accepted
accounting principles. The audited financial report must include a
calculation of the program's actual net rate of return less
expenses. The audit must:
(1) be conducted by an independent certified public
accountant; and
(2) include direct and indirect costs attributable to
the use of outside consultants, independent contractors, and any
other persons who are not employees of the program.
Sec. 83.004. FIDUCIARY DUTIES. (a) The board and each
investment adviser or other person who has control over the assets
of the trust funds established under this chapter are fiduciaries
and subject to the fiduciary standards established under the
Employee Retirement Income Security Act of 1974 (29 U.S.C. Section
1001 et seq.) with respect to the trust funds and the individual
accounts.
(b) Each fiduciary shall discharge duties with respect to
the program solely in the interest of the participants and with the
care, skill, prudence, and diligence under the circumstances then
prevailing that a prudent person acting in a like capacity and
familiar with those matters would use in the conduct of the same or
similar enterprise.
(c) The board may require each eligible employer to provide
eligible employees with certain information as the board directs.
An employer acting in that capacity:
(1) is not a fiduciary with respect to the trust funds
established under this chapter or the participants' accounts within
a trust fund; and
(2) does not have fiduciary duties under this chapter.
Sec. 83.005. IMMUNITY FROM LIABILITY. (a) The board,
executive director, plan administrator, members of any advisory
committee appointed by the board, and employees of the program are
not liable for any action taken or omission made or suffered by them
in good faith in the performance of any duty in connection with any
program or trust administered under this chapter.
(b) This section does not waive the state's immunity from
suit or liability.
SUBCHAPTER B. PROGRAM DESIGN AND OPERATION
Sec. 83.051. PROGRAM DESIGN. (a) The board shall design and
implement the secure retirement savings program. The board shall
design, establish, and administer the program in accordance with
this subchapter.
(b) The board shall require an eligible employer to offer to
each eligible employee an opportunity to contribute through payroll
deduction to:
(1) an individual retirement account in the IRA plan;
and
(2) a savings account in the multiple-employer plan.
(c) Unless an eligible employee chooses otherwise, the
board shall automatically enroll the employee in the IRA plan.
(d) A participant is not responsible for choosing
investments in the program.
(e) The board shall allow the following persons to enroll in
the program:
(1) self-employed individuals; and
(2) employers who are not eligible employers.
(f) The board shall operate the program in a manner that
prevents the program from being considered an employee pension
benefit plan as defined by Section 3(2)(A), Employee Retirement
Income Security Act of 1974 (29 U.S.C. Section 1002(2)(A)).
Sec. 83.052. PARTICIPANT BENEFIT. (a) A participant's
retirement savings benefit is calculated from the participant's
plan account balance on the date the retirement savings benefit
becomes payable.
(b) The board shall establish the minimum savings
requirement to create an adequate lifetime annuity.
(c) The board may establish benefits other than a lifetime
annuity when the minimum savings requirement is not met.
(d) For a married participant, the automatic form of benefit
payment is a joint and survivor annuity.
Sec. 83.053. PARTICIPANT CONTRIBUTIONS. (a) The
employee's employer shall deduct contributions from the employee's
compensation at a rate set by the board, unless the employee elects
not to contribute or to contribute at a higher rate.
(b) The board shall set the default contribution rate of at
least three percent of an eligible employee's gross income. Subject
to Subsection (c), the board may increase the default contribution
rate of each IRA plan participant in an amount and at intervals
determined by the board.
(c) An IRA plan participant may opt out of increases
determined by the board.
Sec. 83.054. PARTICIPATING EMPLOYER POWERS AND DUTIES. (a)
A participating employer shall:
(1) make the program available to an eligible employee
not later than the 15th day after the date the employee begins
employment; and
(2) deposit a participant's deduction in a manner
determined by the board, provided that the employer delivers the
amount withheld in a reasonable time period and not later than the
10th business day after the date the amount otherwise would have
been paid to the participant.
(b) A participating employer may not contribute to the IRA
plan.
(c) A participating employer may:
(1) make voluntary contributions to a participating
employee's multiple-employer plan account in the manner
established by the board; and
(2) elect to contribute an amount above the payroll
deduction amount by contributing from an eligible rollover that an
individual retirement account or Roth IRA may accept under the
Internal Revenue Code.
(d) Participating employer contributions under Subsection
(c) must be equal to or less than the applicable limitation to
contributions to a defined contribution plan prescribed by Section
415(c), Internal Revenue Code.
Sec. 83.055. VESTING. Contributions to a participant's
account vest immediately with the participant.
Sec. 83.056. ADMINISTRATIVE FEES AND INVESTMENT EXPENSES.
(a) The board shall allocate administrative fees and investment
expenses to each participant's account balance or annuity on a pro
rata basis or another basis as the board determines fair and
equitable.
(b) The board shall keep the program's administrative fees
and investment expenses as low as possible, and the fees and
expenses combined may not exceed 0.25 percent of the total balance
of the trust funds established under this chapter.
Sec. 83.057. REQUIRED DISCLOSURES. (a) The board shall
design and disseminate to participating employers an employee
information packet to be further distributed to the employer's
employees. The packet must include background information on the
program, the two plans offered under the program, and appropriate
disclosures for employees with regard to a lifetime annuity.
(b) The disclosure form must:
(1) include information about:
(A) federal income tax and retirement benefits
and investment risks associated with participating in the plans;
(B) how to join each plan;
(C) how to opt out of the IRA plan, including an
opt-out form;
(D) how to apply for payment of retirement
benefits; and
(E) how to obtain additional information on the
program; and
(2) clearly state:
(A) the program is not an employer-sponsored
retirement plan;
(B) an employer is not liable for an employee's
decision under this chapter; and
(C) plan investments are not guaranteed by the
state.
(c) The board shall provide the required disclosures in
English. An employer may notify the board of an eligible employee
who speaks a language other than English, and the board shall
provide a translation of the required disclosures in the eligible
employee's language to the employer to distribute to the employee.
Sec. 83.058. SECURE RETIREMENT SAVINGS PROGRAM
ADMINISTRATIVE FUND. (a) The secure retirement savings program
administrative fund is established as a trust fund held outside the
treasury by the comptroller and administered by the board. The
board shall use money in the administrative fund to pay for
administrative and investment expenses the board incurs in the
performance of the board's duties under this chapter.
(b) The administrative fund is separate from the trust fund
established under Section 83.059.
(c) The administrative fund may receive gifts, grants, or
other money deposited to the administrative fund, including money
received from a governmental entity.
(d) The legislature may appropriate money to the fund for
the initial administrative costs required to establish the program.
The board shall repay to the state any amount appropriated under
this subsection.
Sec. 83.059. SECURE RETIREMENT SAVINGS PROGRAM TRUST FUND.
(a) The secure retirement savings program trust fund is
established as a trust fund held outside the treasury by the
comptroller and administered by the board. The board shall:
(1) invest the trust fund assets as a pooled single
fund without distinction as to their source;
(2) hold the trust fund assets collectively for the
proportionate benefit of the participants; and
(3) use the trust fund assets to defray reasonable
expenses of administering, maintaining, and managing investments
of the trust.
(b) The trust fund is intended to provide participants with
a source of retirement income for life. The trust fund holds
separate accounts for each plan within the program as follows:
(1) the IRA trust account is established to accept
individual contributions into individual retirement accounts
established under Sections 408 and 408A, Internal Revenue Code, in
an IRA plan established by the board; and
(2) the multiple-employer trust account is
established for purposes of administering a defined contribution
plan under Sections 401(a)(27) and 414(i), Internal Revenue Code
that:
(A) is a qualified plan under Section 401(a),
Internal Revenue Code; and
(B) may accept contributions from an employer and
employee participating in the multiple-employer plan established
by the board.
(c) The board shall establish investments within the trust
fund that pursue an investment strategy set by the board. The
underlying investments of the trust fund must be diversified so as
to maintain an overall rate of return that is reflective of a medium
level of risk, as determined by the board.
(d) Subject to Subsection (e), money in the trust accounts
may be invested or reinvested by the comptroller or may be invested
wholly or partly under contract with other retirement systems,
private money managers, or both, as determined by the board.
(e) The board shall preserve, invest, and expend the assets
of the trust fund at all times solely for the benefit of
participants.
(f) The state or an eligible employer has no property rights
in the trust fund.
(g) The state may not transfer or use trust fund assets for
any purpose other than the purpose of the trust fund or funding the
expenses of operating the program. Amounts deposited in the trust
fund are not property of the state and may not be commingled with
state money. The state has no claim to or against, or interest in,
the trust fund assets.
(h) The trust fund assets must at all times be held separate
and apart from the assets of the state. The state, the program, the
board, a board member, or an employer may not make a representation
of a guaranty on any investment, rate of return, or interest rate on
amounts held in the trust fund.
SUBCHAPTER C. ENFORCEMENT
Sec. 83.101. ATTORNEY GENERAL. (a) The attorney general is
the legal adviser to the board and shall represent the board in all
litigation.
(b) The attorney general may enforce the provisions of this
chapter.
Sec. 83.102. ADMINISTRATIVE PENALTIES. (a) The board may
impose an administrative penalty on a participating employer for
failure to comply with the requirements under this chapter or a rule
or order adopted under this chapter. The amount of the penalty may
not exceed $1,000 per employee per year.
(b) The amount of an administrative penalty must be based
on:
(1) the seriousness of the violation, including the
nature, circumstances, extent, and gravity of the violation;
(2) the economic harm caused by the violation;
(3) the history of previous violations;
(4) the amount necessary to deter a future violation;
(5) efforts to correct the violation; and
(6) any other matter that justice may require.
(c) The enforcement of the penalty may be stayed during the
time the order is under judicial review if the participating
employer pays the penalty to the clerk of the court or files a
supersedeas bond with the court in the amount of the penalty. A
participating employer who cannot afford to pay the penalty or file
the bond may stay the enforcement by filing an affidavit in the
manner required by the Texas Rules of Civil Procedure for a party
who cannot afford to file security for costs, subject to the right
of the board to contest the affidavit as provided by those rules.
(d) The board or the attorney general may recover reasonable
expenses, including attorney's fees, incurred in recovering the
administrative penalty.
(e) Except as provided by Subsection (g), an administrative
penalty collected under this section shall be deposited to the
credit of the secure retirement savings program trust fund
established under Section 83.059.
(f) In addition to the penalty prescribed by Subsection (a),
the board may impose an administrative penalty on a participating
employer that does not deposit a participant's deduction within the
time required by Section 83.054. The amount of the penalty is equal
to the lost earnings and interest on the participant's
contribution. The comptroller shall prescribe a methodology for
calculating the lost earnings and interest.
(g) An administrative penalty collected under Subsection
(f) shall be deposited to the credit of the secure retirement
savings program trust fund established under Section 83.059 and
credited to the accounts of the affected participants on a pro rata
basis.
SUBCHAPTER D. UNCLAIMED PROPERTY
Sec. 83.151. UNCLAIMED PROPERTY. (a) Subject to this
section, the board shall adopt rules regarding the disposition of
unclaimed proceeds from a participant's account.
(b) The board shall, using due diligence, contact the
participant or the participant's beneficiaries.
(c) Unclaimed proceeds of an account must be delivered to
the comptroller as provided by Chapter 74, Property Code, except if
the participant's or beneficiary's last known address is in this
state, the comptroller may elect to leave the proceeds deposited in
the fund under the program until a claim is made.
SECTION 2. (a) Not later than December 1, 2019, the state
officials described by Section 83.002, Labor Code, as added by this
Act, shall appoint individuals to the board of trustees as required
by that section.
(b) The board of trustees of the secure retirement savings
program established under Chapter 83, Labor Code, as added by this
Act, shall:
(1) not later than September 1, 2020, design and
establish the secure retirement savings program required under
Chapter 83, Labor Code, as added by this Act, including
establishing and opening up for enrollment the IRA plan described
by Section 83.059(b)(1), Labor Code, as added by this Act;
(2) not later than December 1, 2020, allow eligible
employers, as defined by Section 83.001, Labor Code, as added by
this Act, with more than 100 eligible employees, as defined by
Section 83.001, Labor Code, as added by this Act, to implement a
board-approved procedure that allows each of its eligible employees
to participate in the plan;
(3) not later than March 1, 2020, allow eligible
employers with more than 50 eligible employees to implement a
board-approved procedure that allows each of its eligible employees
to participate in the plan; and
(4) not later than June 1, 2020, allow all eligible
employers and other employers permitted to participate in the
program under Section 83.051(e), Labor Code, as added by this Act,
to implement a board-approved procedure that allows each of its
eligible employees to participate in the plan.
SECTION 3. This Act takes effect September 1, 2019.